A single commodity with a marginal cost of Rs.0.75 per unit is manufactured by a
company. Rs.12,000 are fixed expenses. The demand is such that it can exchange up to
Rs.40,000 units at Rs.1.50 per unit, so all further purchases are to be done at Rs.1.00 per
unit. A planned profit of Rs.20,000 is in operation. How many units must be made and
sold?
Answers
Answer:
Contribution desired = Fixed cost + Desired profit
= Rs 12000 + Rs 20000 = Rs 32000
Contribution from 40000 units = 40000 * (1.50 – 0.75) = Rs 30000
Additional units to be produced and sold after 40000 units at Rs 1.00 per unit:
Contribution to be earned after 40000 units = Rs (32000 – 30000) = Rs 2000
New contribution per unit = Rs (1.00 – 0.75) = Rs 0.25
Additional units to be produced for contribution of Rs 2000 = Rs 2000 * 100/25 = 8000 units
Total units to be produced to earn planned profit of Rs 20000 = 40000 units + 8000 units
= 48000 units
Answer:
48,000 units must be made and sold to earn desired profit.
Explanation:
Calculation of Contribution desired
Contribution desired = Fixed cost + Desired Profit
= 12,000 + 20,000 = 32,000
Calculation of contribution by producing 40,000 units.
Contribution per unit = Selling price – Marginal cost
= 1.50 – 0.75 = 0.75
Contribution for producing 40,000 units
= 0.75 x 40,000 units = Rs. 30,000
Additional units to be produced and sold at Rs. 1.00 per unit after 40,000 units.
=Rs.32, 000 –Rs.30,000
=Rs.2, 000
Units to be produced for contribution of Rs. 2, 000 after change in price.
Contribution per unit = Rs. 1.00 – Rs. 0.75= Rs. 0.25
Additional units to be produced for contribution of Rs. 2, 000
= (2, 000 x 100)/25 = 8, 000 units.
Total units to be produced to earn planned profit
= 40, 000 + 8, 000 = 48,000 units.
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